Her assessment lacked credibility because it failed to reference the Wakatipu Basin Land Use Study.

That study, completed by the council in 2017 and recently notified as part of its district plan review, placed the subject site inside the Arrowtown South Landscape Character Unit.

That area had the ''highest capability for development in the Basin'' and could cater for high-density residential development.

Mr Todd said the site's surroundings were already ''compromised'' by development that had effectively extended Arrowtown's urban edge southwards, including the Arrowtown Lifestyle Retirement Village which is under construction.

Arrowtown resident Ken Swain, speaking on behalf of a group of 33 Cotter Ave residents, said they had invested heavily in their properties in the expectation their rural outlook would be protected by the Arrowtown urban growth boundary.

The retirement village should not be regarded as a precedent for more development along the rural side of McDonnell Rd because it was approved under special housing area rules.

Approving the development would be the ''thin edge of the wedge'', Mr Swain said.

''Our greatest fear is this is just the beginning. Arrowtown will cease being a village and become a suburb of Queenstown.''

McDonnell Rd property owners Dame Elizabeth Hanan and husband John said the proposal was contrary to the operative district plan, ignored the Arrowtown urban growth boundary and would destroy the land's ''rural ambience''.